Can Spray Net borrow from others to cover deficits in the Brand Development Fund?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
We will account for the Fund contributions separately from our other funds and not use the Fund for any of our general operating expenses, except to compensate us for the reasonable salaries, administrative costs, third-party costs, travel expenses and overhead we incur in administering the Fund and its programs, including conducting market research, preparing advertising, promotion, and marketing materials, and collecting and accounting for Fund contributions. The Fund is not our asset or a trust, and we do not owe you fiduciary obligations because of our maintaining, directing or administering the Fund or any other reason. The Fund may spend in any fiscal year more or less than the total Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We will use interest earned on Fund contributions to pay costs before spending the Fund's other assets. We will not use Fund contributions for advertising that principally is a solicitation for the sale of franchises, except that we may use/display the phrase "Franchises Available" on any and all advertising/marketing that is covered by the Fund. We will prepare an unaudited, annual statement of Fund collections and costs and give it to you upon written request. We may incorporate Fund or operate it through a separate entity if we deem appropriate. Our affiliate-owned Centers may, but will not be obligated to, contribute to the Fund if and when established. We may use Fund Contributions to cover portions of advertising, marketing and other campaigns that involve other regions where our affiliates have offered and sold franchises (currently, Canada), and will typically cover portions of such expenses with the appropriate Fund(s) that exist in the region(s) at issue (if any).
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 38–49)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, the Brand Development Fund may borrow funds from Spray Net or other sources to cover deficits, provided reasonable interest is paid. This fund is separate from Spray Net's other funds and is not used for general operating expenses, except to cover reasonable costs incurred in administering the fund, such as salaries, administrative costs, third-party costs, travel expenses, and overhead. These expenses are related to market research, advertising, promotion, marketing materials, and the collection and accounting of fund contributions.
Spray Net clarifies that the Brand Development Fund is not an asset or trust, and they do not owe franchisees any fiduciary obligations related to its management. Interest earned on fund contributions will be used to cover costs before using the fund's other assets. Spray Net will not use fund contributions for advertising that primarily solicits franchise sales, although the phrase "Franchises Available" may be used in advertising covered by the fund.
Spray Net will provide an unaudited annual statement of fund collections and costs to franchisees upon written request. They may also incorporate the fund or operate it through a separate entity if deemed appropriate. Affiliate-owned centers may contribute to the fund but are not obligated to do so. Spray Net may use fund contributions for advertising and marketing campaigns in regions where affiliates have offered and sold franchises, such as Canada, and will typically cover expenses with the appropriate funds in those regions, if any. This means that franchisees' contributions could be used in part for advertising efforts outside of their specific territory.